JeOS is a release of Ubuntu that has an installed footprint of 300 MB and comes in a 100 MB iso image. It is optimized for virtualization and runs very, very nicely. With one Drupal installation, php, mysql, apache2 and the like, the server is using about 672 MB.

Running the development server in a virtual machine mitigates much of that risk. You can shut it off and still use the host, back it up easily and I have the virtual machine tunneled and firewalled so if someone manages to get past the router and Ubuntu's fantastic security, they will have little to attack internally.